MGM Sahtu play on hold
Exploration company puts the kibosh on drilling
Walter Strong
Northern News Services
Published Monday, March 24, 2014
TULITA/FORT NORMAN
Calgary-based oil exploration company MGM Energy recently confirmed that it would not be doing any exploratory drilling during the 2014/2015 winter drilling season.
A truck is seen transporting rig components at MGM Energy Corp.'s Windy Island J-39 drilling location in 2010, about 10 km north of Tulita, NWT. The company has announced plans not to drill next winter. - photo courtesy MGM Energy Corp. |
Initially backed by Shell Canada, the junior exploration company was the first ready to begin horizontal hydraulic fracturing in the Sahtu Canol oil shale.
At the time, they were ahead of ConocoPhillips, which recently completed two horizontal fracks near Norman Wells.
MGM's application for approval to proceed with hydraulic fracks was greeted with broad resistance when it went before the Sahtu Land and Water Board. This contributed to the application being recommended for complete environmental assessment, something which Shell was not prepared to entertain due to associated costs.
"We pulled the application ... because we fundamentally do not believe that the exploration phase is the time to do environmental assessments," said MGM vice president of exploration and operations John Hogg, at the time. "We don't have all the answers for the questions."
ConocoPhillips' application before the Sahtu board was, on the other hand, accepted without being recommended for full environmental review.
Besides being described as a very thorough application, their submission to the Sahtu board was also accompanied by many submissions of public support for the project in terms of potential economic stimulus. ConocoPhillips' horizontal fracking has likely given it the kind of key economic feasibility data concerning the Canol shale formation that MGM would have hoped to gain had it received approval for its project.
Shell provided financial backing for MGM's winter 2012/13 drilling program, for which Shell gained a 37 per cent interest in one oil license.
When MGM's application for a license to introduce a horizontal frack was referred to the environmental review board for approval, Shell declined to finance the more extensive environmental review process.
Shell then withdrew its financial backing of MGM's Sahtu exploration, and the company continues to seek a financial partner.
Although the company states it has sufficient cash to fund expected expenditures through 2015 - including environmental reclamation costs - without financial backing the company won't be proceeding next winter with further exploratory drilling.
On Feb. 27, MGM released its most recent oil-in-place estimates based on previous exploration. According to that statement, exploration license EL466, which Shell formerly had an interest in, is showing a one billion barrel gross mean estimate of oil in place.
Much like a mining mineral reserve, there is no assumption that any of the shale oil present is economically viable to extract.
